BANGALORE: RBI announced the Bi monthly policy review today on June 3rd, 2014; As expected it maintained the status quo stance on key policy rates. Repo Rate remained unchanged at 8 percent, Reverse Repo Rate unchanged at 7.00 percent and CRR unchanged at 4 percent. While it reduced SLR by 0.50 percent to 22.50 percent as compared to previous rate of 23 percent with the intention to increase the liquidity in market to some extent.

Reducing SLR will result in releasing 40,000 Crore of liquidity locked up in government securities. This means banks will have that extra room to expand credit, which clearly shows that the Rajan is trying to balance between industrial growth and inflation since inflation stood at 8.59 percent for the April Month while India's economic growth has remained below 5 percent mark for the second year in a row at 4.7 percent in 2013-14.

The RBI has increased the key repo rate three times since Rajan took over as Governor in September and this was the second status quo policy in a row.

The third Bi monthly policy statement is scheduled on August 5, 2014. We may see rate cut in upcoming policy reviews if inflation continues to decline as per the expectation. RBI has set target of CPI at 6 percent by the year 2016.

(With inputs from Rohit Gadia- Founder and CEO, CapitalVia Global Research Limited)